The Royal Bank of Scotland plc (LSE; NYSE: RBS) has seized the ₤1 billion portfolio of 42 Marriott hotels across the UK from Yitzhak Tshuva-controlled Delek Real Estate Ltd. (TASE: DLKR), Igal Ahouvi's Blenheim Property Group Ltd., and Irish REIT Quinlan Private, after the bank failed to secure a debt-for-equity restructuring deal for the properties, UK newspaper "The Financial Times" reported.
The Royal Bank of Scotland appointed Ernst & Young as receivers for the hotels. The three companies bought 47 Marriott hotels from the bank in 2007 for ₤1.1 billion, and subsequently sold five hotels for ₤50 million, which was used to pare down the debt. The bank will try to sell the hotels to recover as much of the £900 million of debt owed by the companies.
The Royal Bank of Scotland had been in talks since 2008 to restructure the debt, under which the bank would have swapped some of the debt for an equity stake.
The portfolio comprises of 42 four and five-star Marriott hotels, with about 8,000 rooms altogether. Marriott International Inc. (NYSE: MAR) manages the hotels under a 30-year agreement.
Delek Real Estate subsidiary Delek Global Real Estate Ltd. owns 17% of the Marriott portfolio. In a statement to the TASE, Delek Real Estate said that it has been writing down the investment in the portfolio since the third quarter of 2009, and that the foreclosure would therefore have no effect on the company's financial reports.
Quilan Private owns 44% of the Marriott portfolio, Blenheim owns 13%, Electra Real Estate Ltd. (TASE:ELCRE) owns 10%, Zadik Bino owns 5% through FIBI Holdings Ltd. (TASE: FIBI), Dorea Investment and Developments Ltd. (TASE:DORA) owns 3%, and UK investors own 8%.
In a notice to the TASE, Electra Real Estate said that the fair value of the balance of its investment in the Marriott portfolio was currently ₤6.3 million (NIS 35 million). Following the appointment of a receiver, it was examining the value of the investment, and that if it makes any change in the value, this will be stated directly in the company's shareholders' equity as part of other overall profit.
Delek Real Estate's share price rose 12.4% on the news to NIS 0.38 by early afternoon, giving a market cap of NIS 146 million. The share price has fallen 72% over the past 12 months.
Published by Globes [online], Israel business news - www.globes-online.com - on June 15, 2011
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